The John M. Olin Center
Paper Abstract
848. Hunt Allcott & Cass R. Sunstein, Regulating Internalities, 01/2016; NBER Working Paper No. 21187.
Abstract: This paper offers a framework for regulating internalities. Using a simple economic model, we provide four principles for designing and evaluating behaviorally-motivated policy. We then outline rules for determining which contexts reliably reflect true preferences and discuss empirical strategies for measuring internalities. As a case study, we focus on energy efficiency policy, including Corporate Average Fuel Economy (CAFE) standards and appliance and lighting energy efficiency standards.